Silverpeak Benchmark Report FLASH APRIL 2020 UPDATE

We are issuing this interim April report due to the dramatic decline and recovery in multiples over the last 3 months. We have added additional chart showing the SaaS multiples split by 75th, and 25th percentile, mean and median which illustrates the spread of SaaS performance.  For this update the charts are just from 1 January 2019 to 30 April 2020.

Report highlights

  • From the low point to 30 April, Median Revenue multiples for US Vertical and Europe recovered 70% of the loss, US SaaS and Horizontal 60%, and UK 50%.
  • Many software sub-sectors are seen to be behaving in a resilient way to COVID-era trading. US Horizontal EBITDA multiples recovered to near pre-COVID levels.
  • The SaaS chart shows how the 75th percentile revenue multiple was the biggest faller in Q1 at 3.9x to near the Mean, and now has recovered 2.5x of the loss to 9.7x. Quality is still rewarded with 75th percentile multiple almost 200% of the 25th percentile 5x, which is 1.9x below Median. However, both recovered the same 63% of their loss to 30 April

Silverpeak Benchmark Report FLASH APRIL 2020 UPDATE

COVID-19 triggers a significant market decline

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

This quarter, we’ve also created a COVID-19 index, analysing its impact on the Enterprise Value of various sub-sectors within our data set.

Report highlights

  • The unprecedented COVID-19 pandemic has resulted in a U-turn of last quarter’s growing revenue multiples, which has also amplified the decline of EBITDA multiples across all categories. Europe, UK Small & Mid and US Vertical revenue multiples have all sunk to pre-2015 levels.
  • US Horizontal revenue multiples have fallen dramatically since their immense growth of 22% last quarter. But, for the first time since mid-2017, US Horizontal EBITDA multiples are now higher than US SaaS multiples, despite having a 3% lower median EBITDA margin.
  • US SaaS revenue multiples have crashed by 28%, to a similar level to Q2 2017, despite only a 1% decline in forecast revenue. In practice, most revenue guidance has been suspended. The multiples fall was amplified for EBITDA multiples, where they now lie at 23.7x, plummeting 40% since last quarter.
  • Proportionate falls in revenue multiples have been greatest in the US. However, reduction in forecast growth is greatest for UK Small & Mid and Europe, both reducing by 1/3 to c.10%.

Silverpeak Benchmark Report Q1_2020

Revenue growth forecast doubles from Q3 to Q4 for UK and European software

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Starting this quarter, we have included a snapshot on European software M&A.

Report highlights

  • US SaaS revenue multiples were predicted to continue their descent from Q3, however, they rebounded from a 7.7x trough to end the quarter at 8.2x. Contrastingly, EBITDA multiples have continued to fall, reaching a low of 35.6x in H2 2019 from their H1 peak of 44.0x.
  • US Horizontal revenue multiples have done a U-turn since last quarter’s 11% fall; increasing 22.3% to 6.9x.
  • UK Small & Mid EBITDA multiples have shot up 3.3x to 19.6x. They look on course to match their historical peak of 22.0x in H2 2018. Furthermore, their median forecast annual revenue growth has doubled since last quarter, showing positive signs for these companies, despite the recent political events surrounding Brexit.
  • European revenue multiples were the only ones to fall in Q4. However, they have had the strongest growth in EBITDA margin (+4.9%) out of all the categories.

Silverpeak Benchmark Report Q4_2019

Tech Tour Mobility Summit 2019: Investment in European mobility companies is accelerating in 2019

Silverpeak were delighted to sponsor the inaugural Tech Tour Mobility Summit 2019 in Munich last week.

With 70+investors and corporates and 30 pre-selected Scale-ups in six Mobility tech tracks, the event enabled attendees to deep dive into the future of Mobility.

Pietro Strada, Silverpeak Managing Partner, spoke on the financing environment for growth capital (B and C rounds) where data shows that the investment in European mobility companies is accelerating in 2019 in terms of both number of deals and invested amount.

Silverpeak_The State of the Market for Series B & C Rounds in European Tech Companies_November 2019

“There are many different players who want to be at the forefront of mobility the sector: some are entirely new entrants, some have to complement their traditional revenues as they come under threat. We expect to see significant investment activity and consolidation over the next few years” said Pietro, “We know this space very well having recently advised Oxbotica, the autonomous vehicle software company, and Ticketer, the public bus ticketing and fleet management company.”

David Ford, Director, who moderated the ‘Smart Mobility’ session, said, “The urban transport sector is on the cusp of great change, thanks to a confluence of new technologies. From self-driving cars, to Mobility-as-a-Service (MaaS), to shared mobility and convenience apps – the potential is truly extraordinary.”

Last month Silverpeak updated its research report “The Future of Urban Transport”.

Autonomous vehicles, shared mobility, and Mobility as a Service – the future of the urban transport market is already here.

 

Autonomous vehicles, shared mobility, and Mobility as a Service – the future of the urban transport market is already here.

The urban transport sector is on the cusp of great change, thanks to a confluence of new technologies. From self-driving cars, to Mobility-as-a-Service (MaaS), to shared mobility and convenience apps – the potential is truly extraordinary.

“MaaS is the concept of being able to use mobility tools to buy a number of different trips on a variety of transport modes, but in one place,” says Pietro Strada, managing partner at Silverpeak. “You could leave home in a taxi, then jump on a tube, take a train then finish your journey with another taxi. That’s four separate trips, in four different vehicles, which you pay for four different times”.

“But with MaaS, you would simply pay once for the entire journey.”

With this technology starting to get deployed in major cities, there is a very clear need for more investment, innovation and regulation in the urban transport market.

The world is becoming increasingly urbanised. In 1970, just 30 per cent of the population lived in urban areas. This figure had risen to 54 per cent by 2014, and the UN estimates that a massive 66 per cent of the world’s population will live in cities and urbanised areas by 2050.

Meanwhile, concerns around air pollution are growing, emphasising the need for clean technology in densely populated areas. According to the World Health Organisation, 90 per cent of people living in cities are not breathing clean air, and we know that transportation emissions are responsible for more than a quarter of all greenhouse gases.

We are also more connected now than ever before, thanks largely to the advent of affordable mobile technology. There are five billion mobile phone users in the world today – that’s 68 per cent of the total population. By 2023, it has been predicted that one billion of these mobile users will have a 5G subscription, which would allow them to connect to the internet anytime, anywhere.

As a result of these developments, the urban transport market is primed for disruption. This could come in many different forms, from MaaS; to the advent of autonomous driving; to the wide adoption of shared mobility services.

Silverpeak has analysed data on financings and acquisitions in this market, and it has concluded that the next few years will see a sustained level of investments and M&A activity.

1. Mobility as a Service (MaaS)

At its core, MaaS is a mobility distribution model which brings together multiple services in one place, allowing the user to streamline their journeys by planning and booking trips via a single platform.

Across Europe, a number of integrated mobility services are being rolled out, from UbiGo in Sweden, to Qixxit in Germany, and Whim in Finland. Also, car manufacturer Daimler has gotten in on the act, with its Moovel ride-booking service, which is currently being tested in the U.S. and Europe.

There is still some way to go before MaaS becomes mainstream, but the early signs are promising.

“We’ve done a number of deals in different areas of what we are now calling the mobility sector,” says David Ford, director at Silverpeak. “It’s relatively new right now but we think there’s a lot more activity that’s going to go on.”

Transit information providers have raised hundreds of millions of dollars in investment over the past ten years, underlining the enormous value embedded in these services. Germany’s GoEuro, for instance, has raised $296m since it was founded in 2012. It provides a multi-modal search tool that compares and combines rail, car, bus, train and aeroplane routes and prices

In some cases, transit information providers have already started to take the first steps towards becoming fully-fledged MaaS providers. Public transport tracking app CityMapper is using the travel data it gathers from millions of user-planned journeys to run an on-demand, shared rides service in city areas that the data has shown to be underserved by existing transport links.

While these developments are still very much in their infancy, there is a clear first-mover advantage to be won, both in the UK and across Europe.

“There is a lot of activity in the MaaS space,” says Matteo Pozzi, director at Silverpeak. “Many companies are raising significant capital to position for the dramatic anticipated growth in revenues.”

2. Autonomous vehicles

Mass-market self-driving cars have yet to become a reality, but some huge strides have been made in the area of autonomous vehicles.

At Oxbotica – an Oxford University-based firm which is run by professors from the Oxford Robotics Institute – self-driving software is already being used in cars, trucks, forklifts, pods, shuttles, mining and construction vehicles.

“Their technology is amazing – world class,” says Paddy MccGwire, managing partner at Silverpeak. “Last year, they were approached by a huge international car company and another tier one supplier, but they found that these deals would never get to completion. They realised they needed somebody to help them get from A to B, so we started to work with them in March 2018, and five months later we completed a £14m funding round.”

Since then, Silverpeak have helped them raise another round in July 2019, which will be used to accelerate Oxbotica’s growth plans in the coming years. And while we are still a few years away from self-driving commutes, MccGwire points out that on private turf such as airports or docks, this technology can be rolled out far more quickly.

“For instance, one airport found that they could cut the number of vehicles air-side by a third if they were autonomous,” says MccGwire. “And that’s everything from the bus to bring people to baggage handling, to the tug that pushes aeroplanes. So, it’s exciting and there are quite a lot of different benefits for what vehicle automation can do.”

3. Shared mobility

Ride-hailing apps already take up plenty of space on the average smartphone, and the shared mobility market is only just getting started.

Since the Uber and Lyft IPOs, in the ride-hailing sector alone, nearly $70bn (£57bn) has been raised between the top 4 companies: the American players Uber and Lyft as well as their Asian rivals Didi and Grab. Meanwhile, established brands such as GM and Toyota have begun investing in new car-sharing technologies from the likes of Turo and Getaround, with a view to expanding their business model to become service providers as well as vehicle manufacturers.

According to Silverpeak’s research, 2019 investments in ride-hailing, car sharing, and carpooling services rose to an all-time high of $21.7bn. These figures reflect a demographic shift in how transport is viewed in urban areas.

“Millennials in particular live more in cities and buy fewer vehicles,” explains Strada. “They are more likely to rent a vehicle, use a rideshare scheme or take public transport and that’s threatening the business model of the automotive OEMs.”

In fact, in preparation for the “death of car ownership”, BMW and Daimler have pooled their mobility assets into five new joint ventures (now three) to give them additional scale and create vertical mobility powerhouses focused on urban areas.

Scooter sharing and bike sharing schemes have also been gaining traction in the investment community lately. Over the last five years, approximately $9.4bn has been invested into bike and scooter sharing or rental schemes. China is very much in the lead on this trend, with the top three Chinese players raising a significant proportion of the combined fundraising in the market.

Uber, Didi and Lyft have already acquired some of the most promising bike-sharing and scooter-sharing innovators, in a clear indication that urban transport is going green. However, without regulation, this has led to unfavourable unit economics due to a large proportion of bikes and scooters getting damaged, resulting in players such as Ofo verging on bankruptcy.

“Car ownership in urban areas is going to die sooner than outside of urban areas where people need their own vehicles,” adds Strada. “We’re still tens of years away, but once the trend becomes mainstream it’s obviously too late to take a position. You want to be prepared and starting much earlier than that.”

“There are a lot of different players who want to get into the mobility sector for a lot of different reasons and hence, there’s likely to be a lot of consolidation and activity in this space.”

Chinese market dynamics and the future of urban transport

China is a market that is experiencing its own dynamics and in some areas is leading. As well as taking the lead on bike-sharing and scooter-sharing innovation, China is poised to become a global leader in the autonomous car market. Since 2015, China has spent at least $24bn more than the US on 5G technology – an essential component for autonomous vehicle manufacturing. Both Alibaba and Baidu are in the advanced stages of testing self-driving cars, and Alibaba is even looking into the creation of ‘smart roads’ which feed data to cars as they travel.

“China is investing in a lot of AI at the moment,” says Strada. “But there is not a lot of transparency in China. It’s hard to discern what is being done for political purposes and what is being done for economic value.”

Having said this, Strada believes that everyone can learn from China’s commitment to innovation in the urban transport space. And one thing is certain – the urban transport landscape is changing fast.

“We expect that over the next five to ten years, there is going to be sustained activity in investment acquisition in the automotive sector where the traditional players will either have to team up with technology companies that provide a piece of the new infrastructure or they will face competition from new entrants who have completely different business models,” says Strada.

“There is so much change happening in this growing area. Players cannot afford to stand still.”

Tech Tour Deep Tech Summit 2019: Fundraising booming to record highs

Silverpeak were delighted to sponsor the Tech Tour Deep Tech Summit in London, which saw the convergence of 150+ participants including corporates, fund investors, investment bankers, thought-leaders and over 35 CEOs/Founders.

This year’s Summit covered a range of breakthrough technologies including autonomous systems, robotics, AI, IoT, cyber-security, big-data, blockchain, 3D printing, space, hardware and electronics, and other IP-driven solutions enabling digital transformation across multiple industries.

Paddy MccGwire, Managing Partner, Silverpeak gave a keynote to investors  on “The Deep Tech Investment Landscape.”

20191015_DeepTech_Summit_FINAL

Pietro Strada, Managing Partner, Silverpeak and Shawn Atkinson, Partner, Orrick, spoke at the CEO workshops on “Later Stage Fundraising and Deal-Making for Deep-Tech Companies.”

US EBITDA multiples reach record highs but revenue multiples down across the board

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

  • US SaaS revenue multiples have been peaking since March 2019 but are showing signs of a potential downturn occurring in Q4 2019, supported by their 7% drop in multiples since Q2. However, their median EBITDA margin has been outperforming the other categories, rising 1.4% versus their average 2% decline.
  • US Horizontal revenue multiples took a nose dive, falling 11% from last quarter; effectively ending the period, from Q3 2018, in which it was consistently above US Vertical.
  • UK Small & Mid revenue multiples have been stagnant since 2015 and their EBITDA multiples have been slowly falling; not recovering from their 7x plunge in Q4 2018.
  • European companies did not experience a decline themselves, instead growing 0.6%, despite the bear-ish market, where there was an average fall of 7% in revenue multiples across the other 4 categories.

Silverpeak Benchmark Report Q3_2019

US SaaS multiples blast previous high out of the water

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

  • US SaaS median revenue multiples have continued to rise, surpassing their previous quarter end, 8.2x, by 7%; whilst also reaching an all time high of 9.4x during the quarter
  • UK Small & Mid median revenue multiples were recovering, closing 6.7% higher than the previous quarter; however, they are still 10% lower than the same quarter last year (3.9x)
  • European companies continue to have the lowest valuations, with no sign of this trend changing any time soon

Silverpeak Benchmark Report Q2_2019_Final

US SaaS multiples skyrocket while growth forecasts fall

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

  • US SaaS median revenue multiple rocketed by 49.5% QOQ to 8.2x, reaching the previous peak. In the meantime, its revenue growth expectation declined by 6.5% QOQ to 18.9%
  • US Horizontal and US Vertical revenue multiples followed the trend of US SaaS TEV/Sales and increased by 23.9% and 18.1% QOQ respectively
  • UK Small & Mid diverged further from US multiples, having closed the gap in 2018.
  • European companies, who continue to have the lowest valuations, were the only category that experienced a drop in TEV/Sales QOQ, from
    2.0x (Q4’18) to 1.9x (Q1’19)

Silverpeak Benchmark Report Q1_2019

Autonomous vehicles, shared mobility, and Mobility as a Service – the future of the urban transport market is already here.

The urban transport sector is on the cusp of great change, thanks to a confluence of new technologies. From self-driving cars, to Mobility-as-a-Service (MaaS), to shared mobility and convenience apps – the potential is truly extraordinary.

“MaaS is the concept of being able to use mobility tools to buy a number of different trips on a variety of transport modes, but in one place,” says Pietro Strada, managing partner at Silverpeak. “You could leave home in a taxi, then jump on a tube, take a train then finish your journey with another taxi. That’s four separate trips, in four different vehicles, which you pay for four different times”.
“But with MaaS, you would simply pay once for the entire journey.”

While this technology is still some way away, there is a very clear need for more investment and innovation in the urban transport market.

The world is becoming increasingly urbanised. In 1970, just 30 per cent of the population lived in urban areas. This figure had risen to 54 per cent by 2014, and the UN estimates that a massive 66 per cent of the world’s population will live in cities and urbanised areas by 2050.

Meanwhile, concerns around air pollution are growing, emphasising the need for clean technology in densely populated areas. According to the World Health Organisation, 90 per cent of people living in cities are not breathing clean air, and we know that transportation emissions are responsible for more than a quarter of all greenhouse gases.

We are also more connected now than ever before, thanks largely to the advent of affordable mobile technology. There are five billion mobile phone users in the world today – that’s 68 per cent of the total population. By 2023, it has been predicted that one billion of these mobile users will have a 5G subscription, which would allow them to connect to the internet anytime, anywhere.

As a result of these developments, the urban transport market is primed for disruption. This could come in many different forms, from MaaS; to the advent of autonomous driving; to the wide adoption of shared mobility services.

Silverpeak has analysed data on financings and acquisitions in this market, and it has concluded that the next few years will see a sustained level of investments and M&A activity.

1. Mobility as a Service (MaaS)

At its core, MaaS is a mobility distribution model which brings together multiple services in one place, allowing the user to streamline their journeys by planning and booking trips via a single platform.

Across Europe, a number of integrated mobility services are being rolled out, from UbiGo in Sweden, to Qixxit in Germany, and whim in Finland. Also, car manufacturer Daimler has gotten in on the act, with its Moovel ride-booking service, which is currently being tested in the U.S. and Europe.

There is still some way to go before MaaS becomes mainstream, but the early signs are promising.

“We’ve done a number of deals in different areas of what we are now calling the mobility sector,” says David Ford, director at Silverpeak. “It’s relatively new right now but we think there’s a lot more activity that’s going to go on.”

Transit information providers have raised hundreds of millions of dollars in investment over the past ten years, underlining the enormous value embedded in these services. Germany’s GoEuro, for instance, has raised $296m since it was founded in 2012. It provides a multi-modal search tool that compares and combines rail, car, bus, train and aeroplane routes and prices.

In some cases, transit information providers have already started to take the first steps towards becoming fully-fledged MaaS providers. Public transport tracking app CityMapper is using the travel data it gathers from millions of user-planned journeys to run an on-demand, shared rides service in city areas that the data has shown to be underserved by existing transport links.

While these developments are still very much in their infancy, there is a clear first-mover advantage to be won, both in the UK and across Europe.

“There is a lot of activity in the MaaS space,” says Matteo Pozzi, director at Silverpeak. “Many companies are raising significant capital to position for the dramatic anticipated growth in revenues. However, it is still early days for this sector – it is still nascent.”

2. Autonomous vehicles

Mass-market self-driving cars have yet to become a reality, but some huge strides have been made in the area of autonomous vehicles.

At Oxbotica – an Oxford University-based firm which is run by professors from the Oxford Robotics Institute – self-driving software is already being used in cars, trucks, forklifts, pods, shuttles, mining and construction vehicles.

“Their technology is amazing – world class,” says Paddy MccGwire, managing partner at Silverpeak. “Last year, they were approached by a huge international car company and another tier one supplier, but they found that these deals would never get to completion. They realised they needed somebody to help them get from A to B, so we started to work with them in March, and five months later we completed a £14m funding round.”

That funding will be used to accelerate Oxbotica’s growth plans in the coming years. And while we are still a few years away from self-driving commutes, MccGwire points out that on private turf such as airports or docks, this technology can be rolled out far more quickly.

“For instance, one airport found that they could cut the number of vehicles air-side by a third if they were autonomous,” says MccGwire. “And that’s everything from the bus to bring people to baggage handling, to the tug that pushes aeroplanes. So, it’s exciting and there are quite a lot of different benefits for what vehicle automation can do.”

3. Shared mobility

Ride-hailing apps already take up plenty of space on the average smartphone, and the shared mobility market is only just getting started.

In the ride-hailing sector alone, more than $45bn (£34.5bn) has been raised through just two companies: the ubiquitous Uber and China’s rival firm Didi. Meanwhile, established brands such as GM and Toyota have begun investing in new car-sharing technologies from the likes of Turo and Getaround, with a view to expanding their business model to become service providers as well as vehicle manufacturers.

According to Silverpeak’s research, in 2018 investments in ride-hailing, car sharing and carpooling services rose to an all-time high of $20.6bn. These figures reflect a demographic shift in how transport is viewed in urban areas.

“Millennials in particular live more in cities and buy fewer vehicles,” explains Strada. “They are more likely to rent a vehicle, use a rideshare scheme or take public transport and that’s threatening the business model of the automotive OEMs.”

In fact, in preparation for the “death of car ownership”, BMW and Daimler have pooled their mobility assets into five new joint ventures to give them additional scale and create vertical mobility powerhouses focused on urban areas.

Scooter sharing and bike sharing schemes have also been gaining traction in the investment community lately. Over the last five years, approximately $7.6bn has been invested into bike and scooter sharing or rental schemes – and 90 per cent of this was raised in 2017 and 2018 alone. China is very much in the lead on this trend, with the top three Chinese players raising 70 per cent of the combined fundraising in the market.

Uber, Didi and Lyft have already acquired some of the most promising bike-sharing and scooter-sharing innovators, in a clear indication that urban transport is going green.

“Car ownership in urban areas is going to die sooner than outside of urban areas where people need their own vehicles,” adds Strada. “We’re still tens of years away, but once the trend becomes mainstream it’s obviously too late to take a position. You want to be prepared and starting much earlier than that.”

“There are a lot of different players who want to get into the mobility sector for a lot of different reasons and hence, there’s likely to be a lot of consolidation and activity in this space.”

Chinese market dynamics and the future of urban transport

China is a market that is experiencing its own dynamics and in some areas is leading. As well as taking the lead on bike-sharing and scooter-sharing innovation, China is poised to become a global leader in the autonomous car market. Since 2015, China has spent $24bn more than the US on 5G technology – an essential component for autonomous vehicle manufacturing. Both Alibaba and Baidu are in the advanced stages of testing self-driving cars, and Alibaba is even looking into the creation of ‘smart roads’ which feed data to cars as they travel.

“China is investing in a lot of AI at the moment,” says Strada. “But there is not a lot of transparency in China. It’s hard to discern what is being done for political purposes and what is being done for economic value.”

Having said this, Strada believes that everyone can learn from China’s commitment to innovation in the urban transport space. And one thing is certain – the urban transport landscape is changing fast.

“We expect that over the next five to ten years, there is going to be sustained activity in investment acquisition in the automotive sector where the traditional players will either have to team up with technology companies that provide a piece of the new infrastructure or they will face competition from new entrants who have completely different business models,” says Strada.

“There is so much change happening in this growing area. Players cannot afford to stand still.”